Correlation Between China Petrochemical and YC Inox

Can any of the company-specific risk be diversified away by investing in both China Petrochemical and YC Inox at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining China Petrochemical and YC Inox into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Petrochemical Development and YC Inox Co, you can compare the effects of market volatilities on China Petrochemical and YC Inox and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in China Petrochemical with a short position of YC Inox. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petrochemical and YC Inox.

Diversification Opportunities for China Petrochemical and YC Inox

0.75

Correlation Coefficient

China Petrochemical  YC Inox

Poor diversification

The 3 months correlation between China and 2034 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Petrochemical Developmen and YC Inox Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YC Inox and China Petrochemical is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on China Petrochemical Development are associated (or correlated) with YC Inox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YC Inox has no effect on the direction of China Petrochemical i.e., China Petrochemical and YC Inox go up and down completely randomly.

Pair Corralation between China Petrochemical and YC Inox

Assuming the 90 days trading horizon China Petrochemical Development is expected to under-perform the YC Inox. In addition to that, China Petrochemical is 1.01 times more volatile than YC Inox Co. It trades about -0.11 of its total potential returns per unit of risk. YC Inox Co is currently generating about -0.07 per unit of volatility. If you would invest  2,235  in YC Inox Co on September 12, 2024 and sell it today you would lose (165.00) from holding YC Inox Co or give up 7.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

China Petrochemical Developmen  vs.  YC Inox Co

China Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Petrochemical Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

YC Inox

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YC Inox Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with China Petrochemical and YC Inox

The main advantage of trading using opposite China Petrochemical and YC Inox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petrochemical position performs unexpectedly, YC Inox can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in YC Inox will offset losses from the drop in YC Inox's long position.

The idea behind China Petrochemical Development and YC Inox Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.